Myer equity owners to cash in on market recovery

An avalanche of investor interest has convinced Myer's private owners to re-float the group in a deal that values the retailer at up to $3.2 billion. Myer's chief executive Bernie Brookes says the group's owners are leaving plenty of potential profit growth for new investors.

Transcript

ALI MOORE, PRESENTER: An avalanche of investor interest has convinced Myer's private owners to refloat the group in a deal that values the retailer at up to $3.2 billion. Myer's chief executive Bernie Brookes says group's owners are leaving plenty of potential profit growth for new investors. Neal Woolrich reports.

NEAL WOOLRICH, REPORTER: When you're about to embark on the biggest listing the Australian market has seen for years, some celebrity pulling power doesn't hurt.

BERNIE BROOKES, CEO, MYER: The only other alternative was putting my picture on the front of the prospectus, and believe me, that wasn't well-received by the management team.

NEAL WOOLRICH: But Bernie Brookes and his management team do agree that now is the right time for Myer to return to the stockmarket.

BERNIE BROOKES: Some really good signs that we'll have a graduated return to the heyday of retail, and I think that is the case. It may take 12 to 18 months. So our business is not only predicated on that, but remember, during the global financial crisis, we still had a record return for Myer.

NEAL WOOLRICH: Myer's owners have confirmed they will go ahead with an initial public offering, after 140,000 requests for a prospectus were received from retail investors. They're aiming to raise around $2 billion, and the float values Myer up to $3.2 billion. The issue price is expected to range from $3.90 to $4.90, which equates to between 14 and 17 times its forecast 2010 earnings.

GEORGE BOUBOURAS, HEAD OF INVESTMENT STRATEGY, UBS: One needs to be cautiously optimistic and look at is there a fair value to be participating in a consumer discretionary at this stage of the cycle given the run's been so high and given where the multiple is versus sector for consumer discretionary, and given where the multiple of Myer is versus the broader market, it seems to be fair value.

ROB LAKE, OREX RECRUITERS: They've done an excellent job in reducing costs and stripping some absurd costs out of the business. What they haven't been able to do is increase sales yet. And that has to come. And that's the big unknown, is to what extent they can do that.

NEAL WOOLRICH: Myers's current owners TPG, Blum Capital and the Myer family paid $1.4 billion to buy the business from Coles in 2006. None of them are obliged to retain any shareholding in Myer once the company relists, and they could stand to make a sizeable profit out of the float.

GEORGE BOUBOURAS: Yes, it has been an extraordinary ride for TPG, they are realising a profit. But is the investor comfortable with the company, are they comfortable with the profit outline that's been identified in the years ahead. And if they are, then this is the time to participate.

NEAL WOOLRICH: Myers' announcement was good news for its main rival, which is running full-page advertisements to thank stakeholders for their support. Shares in David Jones rose by more than 1.5 per cent on a day when the broader market fell.

GEORGE BOUBOURAS: One would think that Myer would still have to catch up to where David Jones is at the moment, not withstanding that Myer are ahead of expectation there. They really brought forward a lot of their KPIs and metrics and delivered. But they are a little behind David Jones, and that's effectively who they need to sort of catch up with.

NEAL WOOLRICH: Both department stores have been accused of focusing too much on cost cutting in the downturn. Staff levels have dropped and some say service standards have too.

ROB LAKE: I think the concern is perhaps not warranted. A lot of the so-called cuts in staff hours have really been abolishing old workplace practices that were inefficient. What they've done is they've cut some hours and increased them in other areas. They want the staff there when the customers are there.

NEAL WOOLRICH: Myers retail offer will only be open to its employees and customer loyalty card members. The stock is expected to hit the boards again in the first week in November.